Shortage of Memory Chips Has Industry Scrambling

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A severe shortage of computer memory chips is hurting the sales of computers and placing new strains on the semiconductor trade agreement between the United States and Japan, an agreement that some executives blame for the shortage.

Prices for memory chips have doubled or tripled in recent months as customers clamor for supplies. Soaring prices and limited supplies of vital components have prompted manufacturers of computers and other electronic equipment to raise their own prices, slow their assembly lines and delay introducing products that require large amounts of memory. Profits are likely to suffer and some layoffs may follow, if the shortage persists.

Although the shortage reflects several forces within the electronics industry, the one receiving the most attention is the agreement signed by the Governments of the United States and Japan in the summer of 1986.

The agreement was intended to end supposedly unfair trade practices by Japanese manufacturers and help revive chip making in the United States. But instead, some say, it has hurt computer chip users and provided a windfall profit for Japanese chip companies.

''The exact opposite of what they intended is happening,'' said Edward W. Nelson, vice president of Silicon Graphics Inc,, a maker of computer work stations. ''The profits the Japanese are making on the shortage are tremendous, and I'm sure they're plowing it right back into research.''

One clause in the trade agreement called for Japanese manufacturers to stop selling chips below their costs, a practice known as dumping. To end dumping, the Japanese Ministry of International Trade and Industry advised the Japanese companies to limit their output, which would dry up the excesss supply that had kept prices low. In addition, the ministry, under American pressure, became stricter in issuing export licenses for chips, slowing down exports.

Both moves helped curtail chip production, and all sides agree that the dumping has stopped. But now, prices are so high that the floor prices called for in the agreement are moot.

The rising prices have angered users of memory chips. ''Our Government, in trying to help one sector, hurts another sector,'' said Safi Qureshey, president of AST Research, a maker of personal computers.

The trade agreement is also attracting criticism from European companies, which are heavily dependent on foreign chips. They have filed a complaint with the General Agreement on Tariffs and Trade, and Japanese press reports said a GATT panel had recently determined that Japan is violating the rules by restricting production and thereby raising prices of computer chips to comply with the trade agreement.

The trade agreement is defended by the Semiconductor Industry Association, which contends that the current shortage is being caused by other factors, namely rising demand for chips and a changeover to a new generation of technology. The trade group argues that Japan's production cutbacks are not part of the trade agreement but are merely the way in which the Japanese tried to enforce the agreement. The association also points out that the cutbacks were not applied to the new generation of memory chips, in which the most severe shortages are now occurring. The association also says this shortage is not nearly as serious as the last one, in 1984, and will be over by mid-1988.

The association has long argued that a domestic chip industry is vital to the American electronics industry. If American chip makers were to disappear, that would make American computer companies dependent on Japanese chip suppliers, which are also competitors in the computer industry. So the chip makers have contended that it is worth preserving their existence, even if it means slightly higher chip prices.

Even though many computer makers are angered by the chip agreement, the semiconductor industry might be winning on this point. The memory chip shortage is bringing home to some computer companies the dangers of being reliant on others for chips. That is occurring even though there does not appear to be any blatant favoritism on the part of Japanese chip companies to supply Japanese customers at the expense of the American companies. 'A Real Fright'

'I think the systems companies got a real fright with this recent chip shortage and being held hostage to Japanese suppliers,'' said L. William Krause, chief executive of the 3Com Corporation, a maker of personal computer networks.

Dynamic random access memories, or DRAM's, are the most common type of chips used to store information in computers, but American producers have largely given up making them because of huge losses and an inability to compete with the Japanese in low-cost mass production.

The Japanese now control about 90 percent of the DRAM market. All the American suppliers have dropped out, with the exception of Texas Instruments Inc. and tiny Micron Technology Inc. The International Business Machines Corporation and the American Telephone and Telegraph Company have continued to make chips for their own use.

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Recently some electronics companies have been discussing ways of providing incentives to stimulate American chip manufacturing. One approach would be for computer companies to promise to buy a certain number of chips from a company. In addition, computer makers are looking at helping chip companies pay for new plants.

Such closer cooperation would represent a big change in business relations and would more closely parallel the situation in Japan, where the chip producers are owned by large electronics companies and are better able to withstand sales slumps and invest for the future.

High-level meetings have been held since January between executives of some of the leading computer companies and some of the semiconductor companies. As a result, a joint resolution of the American Electronics Association and the Semiconductor Industry Association was issued in which both sides acknowledged their interdependence.

''Even when the shortage is over, we would like to have an indigenous United States supply,'' said Ralph Thomson, senior vice president of the American Electronics Association. ''I'm seeing a new sense that we are in this boat together.''

Alternating periods of scarcity and glut are common with DRAM's. The current shortage began building about the middle of last year but has become severe only in the last few weeks. A 50 Percent Shortfall

Some industry analysts and executives expect that supply of the most advanced memory chip, the one-megabit DRAM, will fall 20 percent to 50 percent below demand in 1988. Estimates of when the shortage will abate range from the middle of this year to the middle of next year.

Virtually all manufacturers have placed customers on allocation, and a gray market has arisen among unauthorized distributors who somehow obtain chips. Some one-megabit chips are being sold for as much as $60 each, compared with about $16 a few months ago.

To compensate for higher chip prices, Sun Microsystems, a maker of engineering work stations, and AST Research, have already raised prices on some products by 10 to 15 percent. That runs counter to the computer industry's general history of price declines.

If the shortage persists it could have more profound effects, slowing sales and earnings. Sun, a fast-growing company, says it could sell more machines if it had more chips, though it does not expect earnings to be hurt this quarter. 'The Word on the Street'

''Certainly, the word on the street is that people aren't making their shipments,'' said Mr. Nelson of Silicon Graphics. Some manufacturers are holding back on new products until they are sure they have enough chips. Radius Inc. of San Jose has delayed for one month the introduction of new color computer screens for Apple Computer Inc.'s Macintosh models, according to Michael Boich, the company's president. The color screens require far more memory than the black-and-white versions.

AST Research, which is a leading vendor of circuit boards that add memory to personal computers, has begun selling an add-on memory board without any memory on it, hoping customers can obtain the chips themselves. Indeed, shipments of products such as memory boards and inexpensive personal computers are most likely to be hurt by the chip shortage. That is because manufacturers of such inexpensive equipment have less ability to pay high prices for chips than those who use the chips in $50,000 minicomputers.

Besides the trade agreement with the Japanese, the shortage has several causes. One is that demand for chips in general is rising as computer makers recover from the slump of two years ago. Moroever, newer generations of computers require greater amounts of memory. The original I.B.M. PC, introduced in 1981, came with as little as 64,000 characters of internal memory. Now, it is not uncommon for powerful personal computers to contain one million to four million characters of memory. A New Generation

Exacerbating the situation is that chip makers are switching to a new generation of memory chips, the one-megabit memory, able to store one million bits of information on a sliver of silicon the size of a thumbtack. The technology for such chips is still not perfected and some manufacturers have had trouble producing at full capacity. Moreover, as manufacturers shift their production lines to the new chips, supplies of the older-generation chip, the 256K RAM, are shrinking, causing a shortage for them as well.

Shortages are also spreading to other types of chips, such as video RAM's used to control computer screens, because production capacity is being diverted to DRAM's.

A version of this article appears in print on March 12, 1988, on Page 1001001 of the National edition with the headline: Shortage of Memory Chips Has Industry Scrambling. Order Reprints|Today's Paper|Subscribe